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Valley National (VLY) Slides 4.4% as Q4 Earnings Lag Estimates
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Shares of Valley National Bancorp (VLY - Free Report) tanked 4.4% in response to lower-than-expected fourth-quarter 2023 results. Adjusted earnings per share of 22 cents lagged the Zacks Consensus Estimate of 25 cents. The bottom line also declined 37.1% on a year-over-year basis.
Results were adversely impacted by a rise in expenses and provisions and lower non-interest income. Also, net interest income (NII) declined due to rising deposit expenses.
Net income available to common shareholders (GAAP basis) was $67.5 million or 13 cents per share, down from $174 million or 34 cents per share in the year-ago quarter.
For 2023, adjusted earnings of $1.06 per share missed the consensus estimate of $1.08 and declined 19.1% year over year. Net income available to common shareholders (GAAP basis) was $482.4 million or 95 cents per share, down from $555.7 million or $1.14 per share in 2022.
Revenues Fall, Expenses Rise
Quarterly total revenues were $450 million, down 13.2% year over year. The top line also missed the Zacks Consensus Estimate of $465.8 million.
For 2023, total revenues grew 1.5% to $1.89 billion. The top line marginally lagged the consensus estimate of $1.9 billion.
NII (fully-taxable-equivalent or FTE basis) was $398.6 million, declining 14.7%. This was due to higher interest expenses. Net interest margin (FTE basis) was 2.82%, down 75 basis points.
Non-interest income decreased marginally to $52.7 million. The fall was largely due to lower service charges on deposit accounts and capital markets.
Non-interest expenses of $340.4 million jumped 27.9%. Adjusted expenses rose 6.6% to $272.6 million.
The efficiency ratio was 60.70%, up from 49.30% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, total loans were $50.2 billion, up marginally sequentially. As of the same date, total deposits amounted to $49.2 billion, declining slightly.
Credit Quality: Mixed Bag
As of Dec 31, 2023, total non-performing assets were $293.4 million, up 7.9% year over year. Provision for credit losses for loans was $20.7 million, rising substantially from $7.3 million.
Allowance for credit losses as a percentage of total loans was 0.93%, down from 1.03% in the year-ago quarter.
Profitability Ratios Deteriorate, Capital Ratios Improve
At the end of the fourth quarter, adjusted annualized return on average assets was 0.76%, down from 1.29% in the year-earlier quarter. Annualized return on average shareholders’ equity was 7.01%, down from 11.56%.
VLY's tangible common equity to tangible assets ratio was 7.58% as of Dec 31, 2023, up from 7.24% in the corresponding period of 2022. Tier 1 risk-based capital ratio was 9.72%, up from 9.47%. Also, the common equity tier 1 capital ratio of 9.29% declined from 9.03% as of Dec 31, 2022.
Conclusion
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will support financials. However, persistently increasing costs and a challenging macroeconomic backdrop remain major concerns.
In January, Valley National entered into an agreement to sell its commercial premium finance lending business and a large portion of its outstanding loan portfolio. This line of business represented $274.7 million in total loans as of Dec 31, 2023. The transaction is expected to close during the first quarter of 2024 and is not likely to have any material impact on its financial statements.
Valley National Bancorp Price, Consensus and EPS Surprise
East West Bancorp’s (EWBC - Free Report) fourth-quarter 2023 adjusted earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.89. However, the bottom line declined 14.8% from the prior-year quarter.
Including FDIC special assessment-related expenses and gain on the sale of an available-for-sale debt security, EWBC’s earnings per share were $1.69.
Results were primarily aided by an increase in non-interest income. Also, loan balances increased sequentially in the quarter, which was a positive. However, lower NII and higher expenses and provisions were the undermining factors for EWBC.
Webster Financial’s (WBS - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.46 were in line with Zacks Consensus Estimate. This compares favorably with earnings of $1.38 per share a year ago.
Results benefited from lower provisions and solid loans and deposit balances. However, a fall in both NII and non-interest income, along with elevated expenses, was the major headwind for WBS.
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Valley National (VLY) Slides 4.4% as Q4 Earnings Lag Estimates
Shares of Valley National Bancorp (VLY - Free Report) tanked 4.4% in response to lower-than-expected fourth-quarter 2023 results. Adjusted earnings per share of 22 cents lagged the Zacks Consensus Estimate of 25 cents. The bottom line also declined 37.1% on a year-over-year basis.
Results were adversely impacted by a rise in expenses and provisions and lower non-interest income. Also, net interest income (NII) declined due to rising deposit expenses.
Net income available to common shareholders (GAAP basis) was $67.5 million or 13 cents per share, down from $174 million or 34 cents per share in the year-ago quarter.
For 2023, adjusted earnings of $1.06 per share missed the consensus estimate of $1.08 and declined 19.1% year over year. Net income available to common shareholders (GAAP basis) was $482.4 million or 95 cents per share, down from $555.7 million or $1.14 per share in 2022.
Revenues Fall, Expenses Rise
Quarterly total revenues were $450 million, down 13.2% year over year. The top line also missed the Zacks Consensus Estimate of $465.8 million.
For 2023, total revenues grew 1.5% to $1.89 billion. The top line marginally lagged the consensus estimate of $1.9 billion.
NII (fully-taxable-equivalent or FTE basis) was $398.6 million, declining 14.7%. This was due to higher interest expenses. Net interest margin (FTE basis) was 2.82%, down 75 basis points.
Non-interest income decreased marginally to $52.7 million. The fall was largely due to lower service charges on deposit accounts and capital markets.
Non-interest expenses of $340.4 million jumped 27.9%. Adjusted expenses rose 6.6% to $272.6 million.
The efficiency ratio was 60.70%, up from 49.30% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, total loans were $50.2 billion, up marginally sequentially. As of the same date, total deposits amounted to $49.2 billion, declining slightly.
Credit Quality: Mixed Bag
As of Dec 31, 2023, total non-performing assets were $293.4 million, up 7.9% year over year. Provision for credit losses for loans was $20.7 million, rising substantially from $7.3 million.
Allowance for credit losses as a percentage of total loans was 0.93%, down from 1.03% in the year-ago quarter.
Profitability Ratios Deteriorate, Capital Ratios Improve
At the end of the fourth quarter, adjusted annualized return on average assets was 0.76%, down from 1.29% in the year-earlier quarter. Annualized return on average shareholders’ equity was 7.01%, down from 11.56%.
VLY's tangible common equity to tangible assets ratio was 7.58% as of Dec 31, 2023, up from 7.24% in the corresponding period of 2022. Tier 1 risk-based capital ratio was 9.72%, up from 9.47%. Also, the common equity tier 1 capital ratio of 9.29% declined from 9.03% as of Dec 31, 2022.
Conclusion
Valley National’s organic growth trajectory, strategic acquisitions and digitization efforts will support financials. However, persistently increasing costs and a challenging macroeconomic backdrop remain major concerns.
In January, Valley National entered into an agreement to sell its commercial premium finance lending business and a large portion of its outstanding loan portfolio. This line of business represented $274.7 million in total loans as of Dec 31, 2023. The transaction is expected to close during the first quarter of 2024 and is not likely to have any material impact on its financial statements.
Valley National Bancorp Price, Consensus and EPS Surprise
Valley National Bancorp price-consensus-eps-surprise-chart | Valley National Bancorp Quote
Valley National currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
East West Bancorp’s (EWBC - Free Report) fourth-quarter 2023 adjusted earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.89. However, the bottom line declined 14.8% from the prior-year quarter.
Including FDIC special assessment-related expenses and gain on the sale of an available-for-sale debt security, EWBC’s earnings per share were $1.69.
Results were primarily aided by an increase in non-interest income. Also, loan balances increased sequentially in the quarter, which was a positive. However, lower NII and higher expenses and provisions were the undermining factors for EWBC.
Webster Financial’s (WBS - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.46 were in line with Zacks Consensus Estimate. This compares favorably with earnings of $1.38 per share a year ago.
Results benefited from lower provisions and solid loans and deposit balances. However, a fall in both NII and non-interest income, along with elevated expenses, was the major headwind for WBS.